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April 16, 2014 | South Africa

Remittance 'super tax' costs Africa $1.8 billion a year

People walk past a logo of remittance bank Western Union on October 12, 2010 in Addis Ababa.  By Miguel Medina (AFP/File)
People walk past a logo of remittance bank Western Union on October 12, 2010 in Addis Ababa. By Miguel Medina (AFP/File)

London (AFP) - Africans are losing $1.8 billion (1.3 billion euros) a year due to high fees levied on funds sent from abroad by relatives, Britain's leading think tank on development said Wednesday.

The Overseas Development Institute (ODI) found that Africans face some of the highest charges in the world for international transfers, but global leader Western Union insisted that the fees were down to a range of local factors.

The report, issued in partnership with the Comic Relief charity, claims that reducing African charges to the global average would generate enough revenue "to put some 14 million children into school, almost half of the out-of-school total in the region, and provide safe water to 21 million people".

Charges in sub-Saharan Africa average 12 percent on transfers of $200, almost double the global average, according to the report.

"This remittance super tax is diverting resources that families need to invest in education, health and a better future," said Kevin Watkins, the report's co-author and ODI Director.

"Africans living abroad make huge sacrifices to support their families, yet face charges which are indefensible in an age of mobile banking and internet transfers."

Western Union argued that it had "delivered much-needed services to individuals looking for fast, convenient and reliable ways to send money to family and friends" during its 20 years of operating in Africa.

"Our pricing varies between countries depending on a number of factors such as consumer protection costs, local remittance taxes, market distribution, regulatory structure, volume, currency volatility, and other market efficiencies," it added.

"These factors can impact the fees and foreign exchange rates offered by corridor and service type."

The report argued the high fees were due to lack of competition, pointing out that Western Union and MoneyGram control almost two-thirds of the remittance market in Africa.

It estimated that the two companies and their associated banking partners in Africa account for around a third of the $1.8 billion loss associated with high remittance charges each year.

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